U.S. Hotel Forecast Assumptions – August 2026

Strong demand observed in Q1 continued through Q2 2026. That demand, coupled with continued pricing power that was further lifted by impressive World Cup premiums, has led STR and Tourism Economics to raise year-end RevPAR growth projections to +4.4%. Both demand and ADR have been upgraded as well, to +1.7% and +3.1%, respectively.

The pace of RevPAR growth will slow next year as the industry rebalances following a mild downturn in 2025 and recovery-driven 2026. RevPAR is forecasted to increase 2.1%, with the gain coming from a mix of 1.1% demand growth and ADR increasing 1.6%.

The 2027 outlook is driven by expected improvement in the U.S. macroeconomic climate. GDP growth is forecasted to accelerate to +2.6% in 2027, compared to +2.2% in 2026. Inflation is expected to cool, coming near target range at +2.3% next year. ADR will remain the primary driver of RevPAR growth next year, but World Cup and semi-quincentennial offsets over June and July will lead to a deceleration in rate growth relative to 2026. Total U.S. ADR is forecasted to rise 1.6% in 2027. Excluding June and July, rate growth would be +2.1%.

Segmentation

Group demand recovery this year remains one of the more important factors for the forecast, especially in the upper-end scales. Among Luxury and Upper Upscale chains, transient demand is up 3.0% year to date, while group demand is up 1.8%. Group demand reached an inflection point in February, heavily driven by “In the quarter, for the quarter” bookings. Typical 60, 45, and even 30-day lead times had been reduced to 2 or 3 weeks. As we move into the second half of the year, we expect much of the same.

Chain Scales

Travel spending and RevPAR growth remains concentrated higher on the income ladder, with households earning $200k or more accounting for 25% of travel spending despite representing only 11% of households.

Luxury chains are forecasted for double-digit RevPAR growth in both Q2 and Q3 2026, lifting full-year ADR growth to +5.9%. Select-service properties are expected to end 2026 at roughly +3.6% RevPAR, with ADR growth around +2.5%. Rebounding demand in these scales is a positive signal for the industry, stabilizing from the rockiness of 2025. The demand improvements come from a combination of business and leisure travelers. RevPAR growth among Midscale and Economy hotels comes primarily from demand growth. While ADR remains the primary driver for the middle and upper end, the financial pressures on consumers are a limiting factor for consistent rate growth among lower scales.

Pipeline

The newest forecast has 2026 and 2027 supply growth at +0.4% and +0.6% respectively. This expectation illuminates the financial challenges facing new builds, including continued inflationary pressures and increased business costs due to above-average interest rates.

New development among the Upper Midscale, Midscale, and Economy scales is weighted toward extended stay properties.

Inbound/Outbound

International inbound remains a source of deep uncertainty with improvement from 2025 being messy and regional. Year to date, inbound has shown consecutive years of declines in the same month, demonstrating that for the industry, the glut is still here. Even with the World Cup in June, total U.S. inbound traffic was almost flat at +0.2%. Without the World Cup, June would have been the fourth straight month in those consecutive declines.

The outbound travel shifts add support to the demand inflection story. U.S. citizen outbound travel turned negative in recent months—suggesting more travelers are staying stateside, which is a tailwind for domestic hotel demand. Combined with the higher-income household shift and stronger travel-spending share at the top of the income ladder, this helps explain why the upper and middle scales continue to look better positioned than the lower end.

Conclusion

CoStar and Tourism Economics expect continued RevPAR growth in 2027, albeit a more measured pace than in 2026. Modest macroeconomic improvement, continued business financial strength, and group recovery are the key tailwinds underpinning RevPAR growth next year. Headwinds include event offsets from the World Cup in June and July, combined with volatile international inbound travel and continued financial pressure on low-income travelers.

The topline of upper-end outperformance remains in place, but the 2027 forecast is best described as sustained recovery and normalization rather than additional acceleration.